November 13, 2009

Economist's View - 4 new articles

An Open Letter to Harry Reid on Controlling Health Care Costs, by Robert Reich: Dear Senator,
I know you're in a tough spot. It would be bad enough if you only had to get Ben Nelson, Evan Bayh, Mary Landrieu, and Blanche Lincoln on board, but anyone who has to kiss Joe Lieberman's derriere deserves a congressional medal of honor.
But Harry, you really need to take on future health-care costs. The House bill fails to do this. The public option in the House bill is open only to people without employer-provided health insurance. That will be too small a number to have bargaining clout to get good deals from drug companies and medical providers. And it will mainly attract people who have more expensive medical needs...

You also know a public insurance option that's open to everyone would cut future health costs dramatically by imposing real competition on private for-profit insurance plans. That's why the private insurers hate the idea. ...
In addition to the House's weak public option, the deals the White House and Max Baucus made with the drug companies and the AMA will force Americans to pay even more. If, on the other hand, Medicare were allowed to negotiate lower drug prices, biotech drugs weren't granted a twelve-years monopoly, and doctors had to accept Medicare reimbursements in line with legislation enacted years ago, Americans would save billions.
You know all this but you're also trying to get 60 votes in order get any bill to the floor. You have my sympathies, but unless you get these reforms into the final Senate bill you're not really helping most Americans afford future health care. So what do you do?
First, try for the "reconciliation" process, which requires only 51 votes. Every one of the reforms I mention above would fit under the Byrd rule.
If that doesn't work, wrap these reforms together ... and have CBO score the savings. I guarantee you, the number will be large. Then you should dare anyone, Democrat or Republican, to vote against saving Americans so much money...
If neither of these tactics work, then take whatever bill you must to the Senate floor. But then introduce this reform package as the very first amendment to the bill. Call it the "Ted Kennedy Amendment for Helping Middle Class Families Afford Health Care," and whip the hell out of the Democrats. ... If you can't get 51 votes out of Dems for this, publish the list of Dems who vote against it, strip them of their committee chairs or sub-chairs, and make sure the Democratic Senate Campaign Committee gives them zilch when they're up for re-election.
Nobody promised you this would be easy, Harry. But, hell, why are you there, anyway? Your responsibility isn't just to pass whatever will muster 60 votes and that the President and Dems can later call "health care reform." It's to do the right thing by the American people and bring down future health-care costs. Don't cave in to Lieberman or Nelson or the drug companies or the private insurers or the AMA or anyone else. Lead the charge.
All best.

The danger is that a call to cut health care costs will morph into the simplest way to do that, cutting benefits, rather than the harder job of taking on the entrenched interests that contribute so much to the problem.

Free to Lose, by Paul Krugman, Commentary, NY Times: Consider, for a moment, a tale of two countries. Both have suffered a severe recession and lost jobs as a result — but not on the same scale. In Country A, employment has fallen more than 5 percent, and the unemployment rate has more than doubled. In Country B, employment has fallen only half a percent, and unemployment is only slightly higher than it was before the crisis.

Don't you think Country A might have something to learn from Country B?

This story isn't hypothetical. Country A is the United States, where stocks are up, G.D.P. is rising, but the terrible employment situation just keeps getting worse. Country B is Germany, which took a hit to its G.D.P. when world trade collapsed, but has been remarkably successful at avoiding mass job losses. Germany's jobs miracle ... raises serious questions about whether the U.S. government is doing the right things to fight unemployment.

Here in America,... we don't really have a jobs policy: we have a G.D.P. policy. The theory is that by stimulating overall spending we can make G.D.P. grow faster, and this will induce companies to stop firing and resume hiring.

The alternative would be policies that address the job issue more directly. We could, for example, have New-Deal-style employment programs. Perhaps such a thing is politically impossible now ... but we should note, for the record, that at their peak, the W.P.A. and the Civilian Conservation Corps employed millions of Americans, at relatively low cost to the budget.

Alternatively, or in addition, we could have policies that support private-sector employment. Such policies could range from labor rules that discourage firing to financial incentives for companies that either add workers or reduce hours to avoid layoffs.

And that's what the Germans have done. Germany came into the Great Recession with strong employment protection legislation. This has been supplemented with a "short-time work scheme," which provides subsidies to employers who reduce workers' hours rather than laying them off. These measures didn't prevent a nasty recession, but Germany got through the recession with remarkably few job losses.

Should America be trying anything along these lines..., if only as a stopgap?

Now, the usual objection to European-style employment policies is that they're bad for long-run growth... And in normal times there's something to be said for American-style "free to lose" labor markets, in which employers can fire workers at will but also face few barriers to new hiring.

But these aren't normal times. Right now, workers who lose their jobs aren't moving to the jobs of the future; they're entering the ranks of the unemployed and staying there. Long-term unemployment is already at its highest levels since the 1930s, and it's still on the rise.

And long-term unemployment inflicts long-term damage. Workers who have been out of a job for too long often find it hard to get back into the labor market even when conditions improve. And there are hidden costs, too — not least for children, who suffer physically and emotionally when their parents spend months or years unemployed.

So it's time to try something different. ... Should we introduce an employment tax credit, like the one proposed by the Economic Policy Institute? Should we introduce the German-style job-sharing subsidy proposed by the Center for Economic Policy Research? Both are worthy of consideration.

The point is that we need to start doing something more than, and different from, what we're already doing. And the experience of other countries suggests that it's time for a policy that explicitly and directly targets job creation.